Now we are getting somewhere...

This week, the economic debate centres on the question of whether inflation exists (here and now), whether we are in the presence of inflation, what inflation's presencing would be, etc.  The difference between this debate and previous discussions of inflation (say in the early 90's or the the 70's), is that it is inspired by a rising awareness of an intensification of the radical absence of inflation in the housing market.   The deflationary trend has dominated both policy-making and media discourse up to this point in 2008.  Now, with the re-emergence of concept of inflation (hoisted by statistical rhetoric asserting its presence here and now in the economy), the debate has taken on the semblance of a Blakian  theological structure in all its speculative anxiety, with Inflation at the top and Deflation at the bottom, and stability for an earth, with heaven and hell constantly trading places.  The problem is, of course, that no one can coherently argue for either a general deflationary trend or an inflationary trend.  A similar torsion in the 70's - spurred by a mysterious combination of stagnation and inflation - brought us the somewhat retarded word stagflation (sounds like jerking off a male deer).  Again and again, the phenomenal expansiveness of life demolishes economic understanding.  The entire terrain of the possible expands far into the impossible (without making it less impossible), and all the dismal science can do is reapply the up-down binary.  Well, if writing about economics means provisionally accepting this binary for purposes of strategic understanding, then so be it, and in fact I will do more:  I will take sides, and commit my efforts absolutely, not to a heavenly balance of controlled inflation, or to a karmic cycle of rises and falls, but to the absolute conquest of deflationary tendencies, to the loss of all value, and even the concept of value itself.  For purposes of writing, anyway.

ISM Nonmanufacturing Index Will Narrate Deflationary Collapse

This index of the performance of financial services, real estate, the
entertainment business, and construction, dropped off a cliff
yesterday, and is certainly the one to watch for signs of radical
deflation. Having no faith whatsoever in its "accuracy" should not
deter us from reading it for nervous volatility, and even signs of
aphasic silences. The reason is that this index seems to track a
peculiar variety of dying simulacra in the global economy. What do
real estate, financial services, hollywood, and the construction
business have in common? They rely for their livelihood on
controlling access to "skills" and "values" that are either mired in
crisises of self-doubt or are rapidly democratizing as we speak;
respectively: location (real estate), capital growth (financial
services), entertainment (obviously), craftsmanship (construction).
If learning to live means learning to be skeptical enough about these
"skills" and "values" to be able to chose either to become good at
them or resist their hegemony, then this whole sector will be well
and truly done-for - at least in its current modality.
What of manufacturing, then?

Impossible Probabilities

The Street reminds us this week of one of the great historical torsions of methodological skepticism:  Although we suspend judgement by thinking in probabilities instead of outcomes, the certainty that "probable" outcomes predominate historically is never interrogated: 

"Consider future market action in terms of probabilities, not outcomes. For example, assume that some causative factor resulted in a specific event (X --> Y) seven out of nine times. The most you can say is that when "X" occurred in the past, it has resulted in "Y" approximately 78% of the time.

But remember, there is a huge difference between historical occurrence and future likelihood. In the example above, this does not necessarily even mean that since "X" has just occurred, there is a 78% that "Y" will happen. Consider: was the first X/Y occurrence really a 100% or zero? Did the second one become 100%, 50%, or 0%, then the 3rd 100%, 66%, 33% or 0%?"

Did an event like the '29 crash follow 7 times out 9 similar historical situations?  Of course not. The temptation is to say that this is because such a situation had never before existed, and that this radical differentiation was a chaotic exception within a larger, well-established inductive order distributed along the economic history of modernity.  Sociologically, it is very interesting to see how this sociological presupposition about the predictability of human behavior collapses so predictably in times of crisis.

Present market data yields a very strong indication (and in a way it yields nothing else) of just such an emergent volatility.  As the best indicator of a psycho-social event in the performative logic of economics, the instability of "predictive comportment" is what we should be paying the most attention to.

Bullish on Depression

From the Post Opinions:

"But overall, subprime loans were designed for, and snapped up by, the poor. According to a recent study from United for a Fair Economy, 55 percent of subprime loans went to African Americans and 17 percent to whites. Among whites, they went far more frequently to low-income people than to the wealthy -- 39 percent compared with 24 percent."

What do you call it when the poorest people in society cost the elite over 2 trillion dollars in a few short months?  When they cause so massive a deflation that houses become affordable for the first time in a generation?

Localize food and energy production(oil scarcity may yet do this on its own), globalize cultural production (internet, etc.) and its all over.  The economy - if we can even call it that - would be wholly unrecognizable.  Feudalism or a green and free utopia?  Neither, probably.  

Things are suddenly looking slightly more Jeffersonian than Marxian - which makes me very nervous.